What Gusto Does

Gusto is payroll and HR software that handles paychecks, tax filings, and employee records for small businesses. Instead of calculating pay by hand or using spreadsheets, you enter employee hours or salaries into Gusto, and the software computes taxes, deductions, and net pay, then deposits money into employee bank accounts on the schedule you set. Gusto also files payroll taxes with federal and state agencies on your behalf and keeps records of employee information, time off, and documents in one place.

The software is designed for business owners who want to move payroll off a spreadsheet but may not have a dedicated HR department. You can run it from a computer or phone, and Gusto handles the math and filing important date so you do not have to track tax rates or remember when quarterly payments are due.

Key Takeaways

  • Gusto calculates gross pay, taxes, and deductions automatically, then deposits paychecks directly into employee bank accounts on a schedule you choose.
  • The software files federal and state payroll taxes and generates the tax forms your business needs at year-end, removing the need to track important date yourself.
  • You can add employees, track time off, store documents, and run reports all within Gusto instead of managing separate systems.
  • Gusto charges a monthly fee per employee, with pricing that varies based on the number of employees and which features you add.

How Payroll Processing Works in Gusto

To run payroll in Gusto, you first enter your employees' information — their names, addresses, tax withholding choices, and bank account details for direct deposit. Then, before each pay period, you log in and enter either hours worked (if employees are hourly) or confirm salary amounts (if employees are salaried). Gusto calculates federal income tax withholding, Social Security, Medicare, and any state or local taxes based on the information you provided during setup.

Once you review the numbers and approve the payroll, Gusto sends the money to your employees' bank accounts on the date you specify. The software also generates pay stubs that employees can view online or read. You can run payroll weekly, biweekly, semimonthly, or monthly — whatever schedule your business uses.

If an employee has other deductions — health insurance premiums, retirement contributions, or wage garnishments — you can add those to their record, and Gusto will subtract them from gross pay before calculating taxes.

Tax Filing and Compliance

One of Gusto's main jobs is filing payroll taxes so you do not have to. After each payroll run, Gusto calculates how much federal income tax, Social Security, and Medicare tax you owe. The software then files those taxes with the IRS on the schedule required — either monthly or semiweekly, depending on your business size. Gusto also handles state and local payroll taxes in states where they explore.

At the end of the year, Gusto generates W-2 forms for your employees and files them with the Social Security Administration. It also produces a 940 form (federal unemployment tax) and 941 forms (quarterly tax reconciliation) if your business owes those taxes. You receive copies of all forms for your records.

Because Gusto tracks everything as you run payroll, you do not have to gather documents in December or worry about missing a filing important date. The software reminds you of upcoming tax important date and handles the submission automatically.

Employee Self-Service and Time Tracking

Gusto gives employees access to a portal where they can view their pay stubs, update their address or tax withholding, and request time off. This reduces the number of questions that land in your inbox and keeps employee information current without you having to chase people down.

If your business uses hourly employees, Gusto includes a time-tracking tool where workers can clock in and out from a computer or phone. Managers can review and approve timesheets before payroll runs, which helps catch errors before paychecks are calculated. You can also set up overtime rules so Gusto automatically flags or calculates overtime pay when an employee exceeds a certain number of hours.

Document Storage and HR Features

Gusto stores employee documents — offer letters, signed tax forms, performance reviews, or any files you upload — in one place organized by employee. This is useful if you need to pull an employee's I-9 form for verification or keep a record of when someone was hired.

The software also tracks paid time off (PTO). You can set how many vacation days, sick days, or personal days each employee receives, and Gusto tracks how many they have used and how many remain. When an employee requests time off through the portal, managers receive a notification and can approve or deny it.

Pricing and What It Includes

Gusto charges a monthly fee that depends on how many employees you have. The cost per employee decreases as you add more staff, so a business with 3 employees pays more per person than a business with 30 employees. Most plans include payroll processing, tax filing, employee self-service, and basic time tracking.

Add-on features — such as benefits administration (helping employees choose health insurance), workers' compensation insurance, or dedicated support — cost extra. You can start with a basic plan and add features later as your business grows.

Gusto offers a free trial so you can test the software before committing to a paid plan. During the trial, you can set up employees, run a test payroll, and see whether the interface works for your business.

When Gusto Makes Sense for Your Business

Gusto works best for small businesses with 1 to 100 employees that want to move payroll off spreadsheets or away from a bookkeeper handling it manually. If you have employees in multiple states, Gusto handles the different tax rules automatically, which saves time. If you have hourly employees and need to track time and overtime, the built-in tools are useful.

Gusto is less necessary if you have only one or two employees and a very straightforward payroll, or if you already use an accountant or bookkeeper who handles all payroll and tax filing. Some businesses also use Gusto alongside other accounting software like QuickBooks, so payroll data syncs between systems.

Frequently Asked Questions

Can I use Gusto if I have employees in different states?

Yes. Gusto handles different state tax rules automatically, so if you have an employee in California and another in Texas, Gusto calculates the correct taxes for each state without you having to learn the rules. You pay one monthly fee regardless of how many states your employees work in.

What happens if I make a mistake on a payroll run?

You can edit a payroll run before it is submitted to the bank, so if you catch an error before approval, you can fix it. If a payroll has already been processed and deposited, you can run a correction payroll to adjust the employee's pay in the next cycle. Gusto's support team can also help you fix errors that affect tax filings.

Does Gusto work with my accounting software?

Gusto integrates with QuickBooks Online, so payroll data can sync automatically between the two systems. If you use a different accounting program, you may be able to export payroll data from Gusto and import it manually, or the two systems may have a direct connection. Check Gusto's integration list for your specific software.

Can employees see their paychecks before they are deposited?

Yes. Employees can log into their Gusto portal and view their pay stub before the payroll is processed, so they can see gross pay, deductions, and net pay. This gives them a chance to flag any errors before money hits their bank account.

What if I need to run payroll outside my normal schedule?

Gusto allows you to run off-cycle payrolls for bonuses, severance, or other one-time payments. You can process these separately from your regular payroll schedule, and Gusto calculates taxes on the bonus amount according to IRS rules.